The Union Budget for 2017-18 presented in Parliament on 1 February by Finance Minister Arun Jaitley highlights the Narendra Modi government’s resolve to promote digital economy by bringing more transactions under the cashless regime. The American government’s USAID had succeeded in convincing Modi that a cashless society is the panacea for all problems India is facing.

He found former Governor of the Reserve Bank of India, Mr Raghuram Rajan, standing in the way of making India an Eldorado. The RBI reportedly sent an eight-page note pointing out the pitfalls of demonetisation. Even in the USA, 46 per cent transactions are carried out in cash. Germany conducted 80 per cent transactions in cash. Modi wnted to be one up on the USA.

Jaitley said in reply to a question in the Rajya Sabha that the decision to print Rs 2,000 notes was taken in May 2016 and printing began in July, two months before Mr Urjit Patel took over as RBI Governor. In October 2016, the USAID and the Finance Ministry entered into an agreement known as Catalyst, inclusive Cashless Payment Partnership with the goal of ushering in a quantum leap in cashless payments in the country.

The partnership was based on a report commissioned by USAID in 2015 and presented in January 2016, titled “Beyond Cash”. The study and subsequent plans were kept a secret, which explains Prime Minister Modi’s statement that preparations for demonetisation had been going on long before the 8 November announcement. In a press statement following the release of the “Beyond Cash” report, USAID revealed that more than 35 key American, Indian and international organisations had partnered with Catalyst.

These organistions, mostly IT companies and payment service providers, stand to benefit from increased digital payments and from associated generation. Among them are Microsoft, credit card companies like Mastercard and Visa, financial services corporation Citigroup and internet services company eBay Inc.

For digital India to become a reality, it is necessary to first focus on access to reliable, stable and high-speed broadband service all over the country. While expansion of BharatNet, a project to connect all the 2.5 lakh gram panchayats is a move in this direction, raising allocation from Rs 6,000 crore in 2016-17 to Rs 10,000 crore for the current fiscal is hardly adequate.

In comparison, China is spending Rs 11.5 lakh crore ($182 billion) to ensure universal, high-speed broadband access by the end of 2017. Jaitley said in his budget speech, “Promotion of digital economy is an integral part of the government’s strategy to clean the system and weed out corruption and black money. This in turn is expected to energise private investment in the country through lower cost of credit. India is now on the cusp of a massive digital revolution.” Claiming the government was creating an ecosystem to make India a global hub for electronic manufacturing and that more than 250 investment proposals for electronics manufacturing had been received during the last two years, Jaitley said that a number of global leaders and mobile manufacturers had already established production facilities in India.

Ram Sewak Sharma, chairman of Telecom Regulatory Authority, is of the view, “Digital financial transactions are not sustainable unless you address the issues of cost, convenience and confidence.” What is important from the citizen’s perspective is that cash does not have any costs. “If I have Rs 100 in my pocket, I get Rs 100 worth of goods. But if I have to pay Re 1 or Rs 2 for the same digitally, it is not fair,” explained Sharma. The payment service providers, predominantly American corporations, stand to benefit most from Catalyst.

India’s digital payment industry is estimated to have the potential to grow to $ 500 billion by 2020 if millions of Indians can be drawn into the digital payment net. USAID and its partner corporations are aware that this policy spells doom for India’s small traders and producers and people in remote regions. “Beyond Cash” had analysed the impact of demonetisation extensively but were not bothered in today’s world dominated by big corporations. Maximisation of profit is all that matters even if this profit comes drenched in the sweat of the toiling masses.

A reality check on the impact of demonetisation shows it has instead of empowering the poor, as claimed by the Prime Minister, impoverished about 40 crore people in the unorganised sector, close to 15 crore casual, manual labourers and 25 crore self-employed and dependent on daily wage earners. Most of them are in deep debt. The agriculture sector is the worst affected. The majority of Indian peasants are small farmers because of the land reforms in vogue in most states.

Small farmers are being driven out of their lands in the name of globalisation so that big agribusiness corporations can take them over. Successive governments have been reducing public investment in agriculture, cutting subsidies on major inputs like fertilizer, electricity and irrigation and gradually phasing out subsidised credit by the public sector banks, allowing imports of heavily subsidized agricultural produce from the developed countries.

Local farmers have not been able to get a remunerative price for their perishables like vegetables and fruit and have even given them away free or fed them to cattle. These policies have pushed Indian agriculture into deep crisis and driven farmers into such despair that more and more of them are committing suicide. A report by the State Bank of India based on a survey last month suggested a sharp decline in business in Mumbai and Pune.

The All-India Manufacturer’s Organisation has projected a drop in employment of 60 per cent and a loss in revenue of 55 per cent by March-end. Reports from hosiery and machine business in Ludhiana suggest that in January business was down by 50 per cent, much sharper than in organised sectors.

Demonetisation has so far not fulfilled any of the objectives spelt out by the Prime Minister. He maintains the decision was taken when the economy was doing well. “Had the economy been weak, then we could not have done it successfully.” According to Budget documents, the revised GDP growth for 2016-17 is estimated at around 6.5 per cent, one per cent less than the previous year, which is about Rs 1.6 lakh crore in monetary terms. This disruption is a direct result of demonetisation. Modi said the decision was not taken for any political mileage but for the benefit of the poor. The poor are groaning under its weight.

Black money cannot be eliminated by denying withdrawal of one’s own tax paid money deposited in banks. On the contrary, it has generated a new breed of black-marketers dealing in currency exchange. Income Tax raids conducted during the currency exchange phase showed there was circulation of black money in the new Rs 2,000 notes when there was an acute shortage of smaller denomination notes. Moving away from a cash economy to a largely cashless economy needs a change in attitude of the people which cannot be brought about by a fiat of the government however well intentioned it may be.

The writer is a veteran journalist and former Director of The Statesman Print Journalism School.